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Home / Motor Insurance / Car Insurance / Zero Depreciation Car Insurance

Zero Depreciation Car Insurance

Q: Can third-party car insurance be converted to zero depreciation?

No, you cannot cover a third-party car insurance policy into zero depreciation car insurance. You can only purchase this cover with a comprehensive car insurance policy.

Zero depreciation, also known as bumper to bumper insurance or nil depreciation insurance, is an add-on cover in car insurance that protects the vehicle's depreciation value. You can opt for zero depreciation cover along with your comprehensive car insurance policy. Generally, during claim settlement, an insurer deducts the depreciation value of parts before replacing the damaged parts. However, with zero depreciation insurance, there's no such deduction, and you receive the 100% claim. Most assets, like our cars, see wear and tear over a period of usage. This causes a dip in the total value of the asset, known as depreciation. Zero Depreciation insurance means that despite the value of your car going down with time, you get complete coverage on expenses incurred in case of damage due to an unforeseen event.

With the help of this add-on cover, you can get a complete claim amount from the insurer without deduction of the vehicular part depreciation. It is advisable to have a relevant zero depreciation car insurance plan, or top up your comprehensive car insurance plan with the bumper to bumper HDFC ERGO add-on!

How Does Zero Depreciation Cover Work?

With zero depreciation insurance, the insurer gives 100% payout for coverage during claim settlement without subtracting the depreciating value of spare parts. If you have only a standalone comprehensive car insurance policy, you will get coverage after deducting the depreciation value of that vehicular part. The depreciation rate differs for each vehicle's component. However, with zero depreciation car insurance, you can stay stress free, as the insurer will make full payment while settling the claim without deducting the depreciation value of vehicle parts.

Here's an example of what happens when your car insurance is with and without zero depreciation add-on.

Case 1: Car insurance without Zero Depreciation add-on

If your vehicle suffers damage due to any insurable peril, your damaged bumper's repairs are worth ₹7,000. Then, your claim amount will be ₹2500 after applying a standard deductible of ₹1000 and 50% depreciation on plastic parts. Thus, you'll have to pay ₹4500 in this case from your pocket.

Case 2: Car insurance with Zero Depreciation add-on

If your vehicle suffers damage due to an accident or any insurable peril, your damaged bumper's repairs are worth ₹7,000. Then, your claim amount will be ₹6000 after applying a standard deductible of ₹1000 and 50% depreciation on plastic parts will not apply to your claim in this case.

Depreciation Rates in Car Insurance

When the policyholder files for claim in car insurance, the payouts are made after considering the reduced value of some parts based on their rate of depreciation. The payment is made for the reduced amount and not for the cost of replacement of the part.

Check out the table below to know the car components with their rate of depreciation

Car Components	Rate of Depreciation
Paintwork	50%
Fiberglass Components	30%
Glass components	NIL
All Rubber Parts/Nylon Parts/Plastic Parts/ Tyres and Tubes/Batteries and Airbags	50%

You can check out below to know the depreciation of your vehicle per year.

These car value Depreciation Rate in India are as Per IRDAI 2022-2023 guidelines:

Age of Car	Rate of Depreciation
0-6 months old car	5%
6 Months – 1 Year Old Car	15%
1 Year – 2 Years Old Car	20%
2 Year – 3 Years Old Car	30%
3 Year – 4 Years Old Car	40%
4 Year – 5 Years Old Car	50%
Above 5 Years Old Car	Decided Mutually between the Insurer and the Vehicle Owner

What are the Benefits of Zero Depreciation Add-on in Car Insurance?

Zero depreciation cover has a huge impact on the car insurance policy, and it can help the policyholder opting it in numerous ways:

• Higher Payout in case of a claim: Although you will have to pay an extra premium for opting zero depreciation add-on, it will offer you lots of benefits in the long run. Zero depreciation car insurance does not consider depreciation when settling your claims. This will ensure you get a much higher payout for part replacements.

• Save Money: Having a Zero Depreciation add on ensures that you do not have to bear additional financial expenses from your pocket if there is a claim. Without a zero depreciation add on, the cost of depreciation of the parts has to be borne by you. However, with a zero depreciation add on, the insurer takes care of it.

• Protects Loss of Expense: Zero depreciation car insurance helps in increasing the claim settlement amount. Hence, you are safeguarding your expenses, which might be incurred from vehicle damage due to an insurable peril. Without the Zero Dep Add-on, you pay the unpaid portion of the claim, which is deducted as depreciation. And, if the damage to your car is considerable, the repair bill will undoubtedly be higher and burn a hole in your pocket.

What is Not Covered in a Zero Depreciation Add-on ?

• Zero depreciation add on would not provide any claim for damaged vehicular parts if the accident involved the insured vehicle driven by a driver without a licence or under the influence of drugs or alcohol.

• No payouts under zero depreciation add on will be made for damage due to engine oil, coolant, clutch oil, etc.

• Normal wear and tear or mechanical breakdown are also not covered

• Total loss to your car.

Traditional Car Insurance Vs. Zero Depreciation Car Insurance

Features	Traditional or Comprehensive Insurance	Zero Depreciation Car Insurance
Meaning	It provides coverage for third parties and your car's own damages.	A zero depreciation cover is an optional add on you can opt for in your comprehensive car insurance policy. This add on in your plan ensures that the insurer won’t charge for your car’s depreciation during claims.
Cost of Depreciation	With a comprehensive car insurance policy, you will have to pay for the cost of depreciation of your car’s parts during car insurance claims.	With zero depreciation insurance, you don’t have to pay for the cost of depreciation during your car insurance claims.
Claim Settlement	Claim settlement only happens after deducting car depreciation as per mentioned rates.	Claim settlement post inclusion of car depreciation.
Premium Value	Lower premium value	Higher value compared to traditional coverage
Vehicle’s Age	Purchasable for cars less than 15 years of age	Purchasable for cars less than 7 years of age.
Cost of Repair	All costs incurred are shareable between customer and insurer	All costs incurred are borne by insurer

How is Zero Depreciation Insurance Premium Determined?

Zero dep car insurance premium amount is calculated based on the car's age, make, & model of the car, and the location where the car is registered.

Car's age: The depreciation value of a car is proportional to its age. Therefore, the older the car, the higher will be the premium for zero depreciation add on in car insurance.
Car's model: The type of car is important for car insurance. Because different models use different sorts of parts, the cost of these parts also varies. As a result, the insurer considers the car model when computing the premium for zero depreciation.
Location: The premium for zero depreciation will be higher if you reside where road accidents are frequent or prone to natural disasters. The insurer also considers the location where you drive your car while deciding the premium for zero depreciation.
Insured Declared Value (IDV): The IDV is crucial in determining zero depreciation insurance premiums. When calculating the premium under the IDV, the depreciation is deducted from the insured car's current worth.
Engine type: You might have to pay more for zero depreciation cover if you drive a car with a higher cubic capacity engine.
Accessories installation: Install accessories smartly in your vehicle. There is a separate calculation for the zero depreciation premium for additional features and accessories.
Fuel type: The cost for zero depreciation might be higher depending on whether you drive your car on CNG, diesel, petrol, or an electric car.

Who Should Opt for a Zero Depreciation Cover?

No matter if you own a new car or an old one, or you are someone who has an expensive sports car, you can opt for a zero depreciation car insurance add-on cover. It will save you from bearing the heavy depreciation costs applied on the parts of the car or the reduced benefit while claiming settlement.

Here is the list of people who should opt for Zero Depreciation Car Insurance:

1. New Car Owners: You must add a zero depreciation add-on cover to the comprehensive insurance policy if you own a new car. By doing so, you can get extensive insurance coverage for your car.

2. Sports Car Owners: Owning a sports car brings incredible thrill and pride. However, since the prices of such cars are expensive, their components are costly too and often difficult to repair and replace. Therefore, sports car owners should buy zero depreciation car insurance.

3. Luxury Car Owners: If you own a luxury car, the cost of repair of its components could create a massive hole in your pocket, even with a standalone own damage car insurance policy. Therefore, luxury car owners must not think twice before opting for a zero depreciation cover for your luxury car.

Things to Keep in Mind About the Zero Depreciation Add-on Cover

Before you opt for a zero depreciation add-on, below are the key points that need to be considered

● Zero dep car insurance applies for cars below 7 years of age

● Zero dep insurance for a car only protects your car’s component's depreciation value while claim settlement

● Mandatory deduction continues and is not covered under zero dep car insurance

How to Get Zero Depreciation Car Insurance Online?

Buying a zero dep car insurance policy is easy and smooth. Here’s a step-by-step guide:

Step 1 - Visit the HDFC ERGO website and click on car insurance. Enter the vehicle registration number and proceed by clicking on get a quote.

Step 2 - After clicking on get a quote or proceed without the car number, you will have to enter your car’s make and model.

Step 3 - You must choose a comprehensive insurance plan.

Step 4 - Give details about your last insurance policy- Date of Expiry, No Claim Bonus Earned and Claims Made. Enter your mobile number and email ID.

Step 5 - Customise your plan by selecting zero depreciation add on cover.

Step 6 - Go through the policy and coverage details and proceed to pay the insurance premium online.

After this, a confirmation email will be sent to you with zero depreciation car insurance policy add on detail.

Claim Settlement with Zero Depreciation Car Insurance

In the case of standalone comprehensive car insurance plans, the insurer only reimburses the loss after deducting the depreciation value of the replaced parts. Under this policy, as per the depreciation rate for parts, you will have to pay 50% on nylon, plastic, and rubber parts, including batteries, 30% on fiber components and so on. On the other hand, with zero depreciation add on, you will pay only the standard deductible, which is Rs 1000 on all claims. The insurer will bear the rest expense for repairing damaged parts.

When is the Zero Depreciation Claim declared Null and Void?

Your zero dep claim is considered null and void in the following situation

• If you are caught driving without a driving licence

• If your car has been stolen, and you have lost both the car keys

• If you are driving under drugs or alcoholic intoxication

• If you haven’t filed an FIR after your car was stolen

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Other HDFC ERGO Car Insurance Add-ons Available

The more comprehensive is the coverage, the more claim is that you can get. To this end, HDFC ERGO offers a select range of add-ons with its comprehensive car insurance plans. Have a look –

Zero Depreciation Cover

One of the most popular add-ons is zero dep. You get the benefit of the complete claim amount without considering depreciation on the parts of your car in case of an accident and damage to your car.

No Claim Bonus Protection

When you do not file any claim for the entire year, HDFC ERGO offers a reward in the form of discounts.

Emergency Assistance Cover

Imagine, you are going somewhere and your car broke down in the middle of nowhere, HDFC ERGO will help you with 24*7 roadside help by offering mechanical help, towing your car, key, and tyre replacement, refuelling, and so forth.

Cost of Consumables

You can get compensated for the amount spent on the replacement of nuts, bolts, brake oil, AC gas, washers, battery water, etc.

Return to Invoice

With the RTI add-on cover, you can claim the entire value of your car’s invoice if you met with an accident and your car is totally damaged.

Engine and Gear Box Protection

Repairing the engine and gearbox is expensive, however, if you opt for this add-on HDFC ERGO will take care of these expenses.

Downtime Protection

You get a daily travel allowance under downtime protection if your car is sent in for repair after an accident.

Pay as you drive

One of the latest and most considerate add-ons is pay-as-you-drive. It is a usage-based add-on where you need to choose a slab for your estimated kilometre coverage based on which the premium is determined.

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Frequently Asked Questions On Zero Depreciation in Car insurance

How much do you pay in case of claim (with Zero dep)?

You end up paying nothing except a few service charges or base deductible as stated in the policy document.

Is zero depreciation cover expensive?

The zero dep cover is slightly costlier than a comprehensive plan. However, this isn’t as expensive as the costs you would have to incur in case of repairs after an accident without such a cover.

What is covered in a zero dep cover?

Zero dep cover offers coverage against damages on all car parts made from plastic, fiber, wood and metal. It covers the cost of painting and dent repair based on policy norms.

It might not cover costs on tyres and coolants or alignment related services. Please check the policy document.

For how long can I renew the zero depreciation policy?

You can opt for the zero dep add-on before your car turns 5 years old.

Is Zero Depreciation Insurance Beneficial for Cars?

Yes, Zero depreciation insurance is beneficial for the insured vehicle as policyholder gets full coverage of car parts without any deduction for depreciation during claim settlemement.

What is IDV in a nil depreciation car insurance policy?

This premium mainly depends on the Insured Declared Value (IDV) of the car. IDV is the maximum amount you can claim against total damage, loss or theft of your car. Thus, IDV, in a nil depreciation insurance policy, plays an integral role. The higher the IDV, the higher the premium towards a zero depreciation add-on cover.

Can third-party car insurance be converted to zero depreciation?

No, you cannot cover a third party car insurance policy into zero depreciation car insurance. You can only purchase this cover with a comprehensive car insurance policy.

Is nil depreciation cover transferable to another owner?

Yes, you can transfer bumper to bumper add on cover with the car insurance policy to the new owner, as the nil depreciation policy is for the car and not the owner. However, the registration number of the car should remain the same.

Should I buy zero depreciation car insurance?

Yes, it is worthy to buy zero depreciation car insurance to get full amount from the insurer during claim settlement. The insurer will only charge standard deductible value and won’t apply depreciation on vehicle’s part while making the payment for the claim.